Acorns' Roundups Are Flawed. The App is Great Anyway

I never use Acorns for its intended purpose. Still, I use it all the time.

The investment app’s driven by its round-up feature. With every purchase you make, Acorn rounds the price up to the nearest dollar and invests the difference into a mutual fund of your choice.

When you charge a 75 cent pack of gum to your credit or debit card, Acorns rounds up the purchase to $1 and withdraws a quarter from your checking account and invests it into a mutual fund. The idea is that while the investments are small, they add up. And once you add the magic of dividends and compound interest, those small investments grow into wealth.

The investment portfolios are managed by the legacy financial firm Vanguard. Through Vanguard, Acorns offers users an array of mutual funds. The choices ranging from conservative portfolios heavy on low-yield, low-risk assets to aggressive portfolios making riskier bets with bigger potential payoffs. You can change portfolios whenever you want but conventional financial wisdom says you’re better off not changing too often.

While Acorns’ round-ups are simple in concept, they require complex and constant communication between financial institutions. Credit card purchases trigger withdrawals from checking accounts that are invested into mutual funds, with the credit card, checking account and investment fund more likely than not owned by different financial institutions.

I originally linked four credit cards to my Acorns account. That number dwindled down gradually and is now at zero. The links between my credit accounts and Acorns encountered a series of technical difficulties that I needed to take steps to fix. As a result, my purchases stopped rounding up. But despite losing the round-up feature, I became even more of an Acorns power user.

My problems with linking accounts led me to realize that my purchasing habits were a bad fit for round-ups. I don’t buy stuff often enough for round-ups to have an impact. I’m a thrifty creature of habit who often goes days without making a purchase. I plan out my shopping trips and buy in bulk, saving more money overall but leaving less wiggle room for investing.

While round-ups are Acorns’ marquee feature but the app has other features as well. I soon found out that the less heralded functions fit my personality and financial needs better than the round-ups. I set up a recurring weekly investment of $50. It was a modest sum rendered painless by being metered out once a week. The weekly auto-investment insured steady growth. Acorn’s one-time investment feature satisfied my twitchy need to do something with my money in times of anxiety. As long as I was connected to the internet, I could pick up my cell phone and invest at any time.

Through those two features, my account snowballed. Investing was easy with Acorns. I ended up investing more money into it than my online brokerage account which only allows for monthly automatic investments and is difficult to access on my phone.

It’s been months since I made a round-up investment. Still, my account looks much more like an oak than it did previously.